Telstra's BT coat doesn't fit

Telstra's BT coat doesn't fit

Summary: The vision of the future BT portrayed this week at an Australian conference was so far removed from how Telstra's David Quilty has described the British telco that I wonder if they were talking about the same UK.

TOPICS: Telcos, Telstra, EU

Much has been said about BT, the largest carrier so far to undergo operational separation, and its relevance to the current debate about the potential separation of Telstra.

Yet with the national broadband network (NBN) deadline set, and an increasingly petulant Telstra now saying it is "100 per cent clear" the company will not build the NBN "if further separation is required", I couldn't help but feel a bit embarrassed for us all while listening to a BT executive speaking at the recent Genesys G-Force conference in Melbourne.

Mark Baines, head of converged communications infrastructure with BT Design, is one of the key figures behind the construction of BT's multi-billion-dollar 21st Century Network (21CN) project, a £10 billion overhaul of Britain's telecommunications infrastructure paralleling BT's recent structural separation.

If we believe Telstra's rhetoric, separation is tantamount to simply shutting off the local copper loop and reverting to using smoke signals to communicate. "Overseas experience has already proven that separation does not work," new Telstra mouthpiece David Quilty was quoted as saying. "It increases costs, reduces efficiencies, limits future innovation and, most importantly, kills off investment."

Not in BT's case, it hasn't. Indeed, the vision of the future Baines portrayed is so far removed from what Quilty describes that I wonder if we're talking about the same UK.

Now, mind you, Baines didn't say BT was totally happy about UK regulator Ofcom's decision to open BT's infrastructure to competitors. "The UK has quite a strong regulatory environment, and we've basically had to give about 4.5 million unbundled lines to our competitors," Baines said in a tone that showed that the change had not been exactly a walk in the park.

However, he was quite positive about the changes that separation has forced upon BT: namely, to get its act together and modernise its infrastructure. The 21CN will be entirely IP-based and that (combined with a strong commitment to SIP, or session initiation protocol, a universal way of connecting VoIP and video calls) means home phone services will never be the same again.

"Innovation really means IP," Baines said, "and our core network is going to be SIP. By 2011, in the UK, the traditional home phone in your home will no longer exist. You will be on broadband by default, and you'll have to write to BT to ask to opt out."

Think about this for a moment. Just three years from now, Baines is saying, IP telephony will form the basis of a completely new phone system. Instead of paying for a vestigial PSTN line just so they can get broadband, consumers, mum-and-pop businesses, and everybody else will get broadband as their basic communications service. IP phones will become standard equipment, carrying voice, video, and other services into customers' homes over the 21CN's fast data connections.

By 2011, in the UK, the traditional home phone in your home will no longer exist.

BT's Mark Baines

This is Quilty's idea of how separation "limits future innovation"?

BT expects the 21CN to deliver annual savings of £1 billion from total costs of around £10 billion. But Quilty says separation "increases costs" and "kills off investment". Huh?

Here's one benefit of separation Quilty hasn't yet weighed in on: to deal with ever more-demanding customers, Baines is helping BT completely re-architect its contact centre, which will use SIP on top of the 21CN to help BT's 30,000 customer support staff work together all over the world.

This will significantly cut the cost of the 400 million customer calls BT handles every year, as well as enabling the customer staff to field support requests lodged via the Web, instant messenger, video-conferencing and other methods.

"We're losing significant margin in wholesale services," Baines said, "and get increased demand from our customers to speak to us on whatever channel they want to speak to us on. Voice is no longer the main channel."

There you have it: BT's own account of some of the changes separation has wrought. As far as I could tell, the worst thing separation has done to BT is to force it to shake off decades of legacy technology, stop trying to milk the PSTN to within an inch of its life, and get on with the business of building a better, bigger, faster, modern and global telco that provides exceptional customer service.

No wonder Telstra is running away from this stuff as quickly as it can. Our own largest carrier has been on a years-long effort of cost-cutting and lay-offs, is stonewalling against the same unions whose support it will need to build the NBN, and even went so far as to brag in its latest annual figures that it had slowed down the trend of people abandoning their fixed lines.

That's right: Telstra slowed PSTN's decline to just 3.2 per cent, with the number of retail access lines increasing by 87,000 during 2007-2008 compared with a 5,000-line decline in 2006-2007. "We continued to add retail customers, defying the trends of our global peers," the CEO's report proudly says.

David Quilty
(Credit: Telstra)

Were it not for full disclosure rules, Telstra would probably have neglected to concede that it lost 572,000 fixed-line customers during the year as they rushed to ULL-based services.

Telstra turned a record $3.7 billion profit last year, but it wasn't by charting a conciliatory and realistic path to the future; it was by fighting change, baring its teeth at competitors and regulators, and stripping back in customer service and every other area it could get away with.

Just consider those fixed-line customers Telstra signed up, 600,000 of them, according to the report, who are now locked into contracts that left them little recourse when Telstra raised line rental rates yet again last month.

BT is talking about delivering VoIP to an entire nation, but Telstra is so eager to protect its fixed-line cash cow that it has yet to offer VoIP services to its customers: defying both international trends and the inevitable weight of progress.

Indeed, we have heard very little about Telstra's long-term vision, apart from rhetorical threats to walk away from the NBN if it doesn't get its way.

Telstra loves to argue that separation has stymied investment in the UK, but Baines' story suggests that separation has in fact motivated BT to pour billions of dollars into a network that will keep it at the forefront of the world's telecommunications providers.

And, he pointed out later in his speech, this network has been designed from the ground up to facilitate interconnectivity with competitors: an important capability in any open market.

Separation behind it, BT seems to be looking towards a bright future. Can Telstra say the same?

Topics: Telcos, Telstra, EU


Australia’s first-world economy relies on first-rate IT and telecommunications innovation. David Braue, an award-winning IT journalist and former Macworld editor, covers its challenges, successes and lessons learned as it uses ICT to assert its leadership in the developing Asia-Pacific region – and strengthen its reputation on the world stage.

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  • Wow!

    Can we get BT to build the FTTN network here in Australia, or maybe something even better (FTTH), because they seem to know what they're doing, unlike some...
  • Yeah but whats the alternative?

    Great point, BUT, what’s the alternative, the coalition of the unwilling? - the amateurs that make up Terria. It has to be Telstra, they just need the government to pay for it all (indirectly) by making the process as drawn out and painful as possible. I just hope that the mobile networks out perform the NBN rollout (in terms of speed and coverage) so that consumers will have an alternative to the new incumbent that is created.
  • An independent company contracting Telstra to build the FTTx

    Great article.

    I think that separating the last mile network from the rest of Telstra would be amazingly beneficial. Not just for other telcos, but it would force the bulk of Telstra to focus on providing interesting technologies & solutions, which they are actually very good at doing.

    Telstra could be structurally separated (so it still owns the network), or Terria could have its way, or we could even separate the last-mile network from Telstra and ask the Terria players to buy into it.

    No more arguing between Telcos about the last mile network, we need it open & non-competitive - but we also should be using Telstra to build it.
  • Wow, what meaningless propaganda.

    David, you have asked no punch's to be pulled, so here goes.
    Your article is full of scewed Terria propaganda . The UK' s benefits of running fibre is not in question or a surprise.
    But running fibre is NOT a function of seperation.
    Which is the point your trying to make.

    Remember Telstra's been calling for FTTN for 3 yrs. It's the other Telco's who dont want it , as it threatens them.
    So as a consolation they reluctantly will wear it, if they break Telstra up.
    So the question of Seperation is a question of what price the Telstra shareholder's will pay if Telstra is seperated.
    Theirfore for your article to be the least bit relevant it should have explored BT's value before and after seperation. But you conveniently neglected to mention the least bit of financial cost or gain to BT shareholders!

    By the way as Telstra will not do FTTN if it is to be seperated. I hope Terria wins and gets the poison chalice that will be FTTN for anyone other than Telstra. As Telstra has a mother of a plan B.
  • Unsurprising

    Telstra's FUD trolls are out in full force as usual. Where's Sydney Lawrence today?

    Lets split Telstra up for good and get this over with. They're holding Australia back.
  • Meaningless?

    No, I think David has addressed most of the concerns that Telstra keep trundling out as reasons why it should be retained as a monopoly provider of a vertically integrated retail/wholesale network. It's the people that refuse to look over the top of the trenchs and see that it's not all doom and gloom despite what NWAT says that are meaningless in this debate.

    What EVERY other Telco in Australia wants is an open access network with transparent pricing, regardless of who provides it. Something that Telstra is going to great lengths to deny to them.
  • Won't happen

    Will not happen...If the oppositions record is anything to go by. Rudd was elected as a breath of fresh air to the Telco sector to break the "deadlock" to further investment..then again why would OPTUS invest if you are getting afree ride off Telstra.

    However there is hope they have more commonsense then the liberals by recinding the OPELess handout. Lets support an Australian company like Telstra!!
  • A BT Exec saying bad things about what BT are doing


    What can we expect, they fought even harder then Telstra to avoid structural separation, now they are forced to do it they have no choice but to say it is the best thing they could have done.

    Telstra is going all IP, they are implementing Alcatel VoIP / SIP gateways in every state, it is planned for completion by 2010. They already have a SIP enabled IP core.

    BT is not ahead of the game, it's just that Dumb Dumb David is so out of touch with reality that he will never say a single word or analyse another person's words that could be construed as fair or reasonable when it comes to Telstra.
  • Telstra all IP

    and they ate doing it without intervention from the government or because of separation. They will make one huge announcements when the time is right, just like building the next g network and not milking the publicity for all it was worth by switching it on one bit at a time (a.k.a. Optus' 50 announcements about getting to 98% by 2009/2010/2099). Telstra's marketing may 5uck but their engineering is world class.
  • Sydney - where are you?

    Great article. I totally agree with the fact that a lack of separation has lead to a lack of innovation on Telstra's part. BT may have fought against separation, but the fact that it went ahead anyway and has brought about innovation shows what could be in this country. I am intrigued to hear what Telstra's Mother of all Plan B's is. It is clearly some great overseas investments (BT did the same and got burnt horribly) in the same vein as their CLS and Soufun investments!!! I am glad I am not a Telstra shareholder as Telstra is bound to fail overseas.
  • Mother of all Plan B's

    I think Telstra mentioned somewhere that they will roll out their cable network more to all the capital cities (forgets about regional centres of course) to compete against the NBN if they lose the right to build it.

    Which 'MIGHT" be good for consumers in the capital cities as Telstra would have to lower it's cable broadband plan prices/up data quotas etc to compete against the NBN.
  • Telstra don't build their networks anyway

    Telstra say they are best placed to build the NBN. They say what a great job they did building their 3G network in record time. But it was the Vendor that built it and Telstra shafted them in the process.

    Telstra don't build anything that just contract it out.
  • overseas

    I pity the shareholders if the plan B involves moving offshore. History shows Telstra simply burns money whenever it pokes its head into other markets, (eg Hong Kong) with NZ perhaps the only example of some limited success and that took years of burning cash to achieve. Also funny how separation of TNZ has been to Tesltras benefit.
  • Sydney Lawrence - Anonymous??

    I think Sydney has already posted - only I don't think he used his name this time! 4th post down, titled 'wow, what meaningless propaganda' - sounds very typically Sydney!
  • Independent voice?

    There seems to be a lot of mention about David Quilty and his comments of "separation does not work - I've seen it", but one important thing to remember is he is employed by Telstra! Telstra is in a unique position; part government owned, part shareholder owned with a strangle-hold grip on the AusTel market. All the while these arguments about whether or not to separate Telstra go on, the more they benefit. The argument is not just about the NBN or FttN, but about the industry structure as a whole and if it is not rectified now, we will have the same arguments in ten years time with the next innovation is proposed. Face it, to promote competition, reduce costs and encourage R&D, separation is a necessity! I lived in the UK until 2001 and remember the initial BT de-regulation with new carriers laying lines and the whole host of new services that came with it. It wasn't a smooth transition, but the benefits that followed were huge! If a decision on the future is not made soon, then Australia will slip further behind in the technology stakes and businesses simply cannot afford that, especially in a geographically wide-spread country like ours!
  • Structural Seperation

    Typical Telstra scare-mongering. Running fibre as an outcome of structural separation is not what the article states.

    The article states that Telstra's argument that structural separation will stifle investment, has more holes in it than a teabag. And Telstra's use of BT as its evidence of this phenomenon is completely unfounded. That’s the point of the article, fibre is not the outcome of structural separation, it’s the outcome of BT’s investment in its own infrastructure after structural separation.

    As BT have experienced, your infrastructure investment must increase in order to compete. If you stand still in a competitive market you will get left behind. Telstra haven’t just been standing in one spot, they've been running backwards.
  • Impartiality

    'Struth, David, I really want to take an interest in what you write, but your long record of bias against Telstra has killed off your credibility in my eyes. You just keep on calling "Wolf!" and trotting out the same old tired complaints under a different heading. This is not reporting, this is opinion - and certainly one that is far from impartial.
  • Separation IS Needed

    I was an Independent Expert in a major telco legal dispute. I believe that separation IS needed to get a plethora of innovative services up and running. Most large encumbents only have an eye for milking cash cows, and are historically slow to bring new services to market. Besides, we need a rational way to set interconnect wholesale rates, as Telstra has proven with wholesale rates higher than retail rates, than the market alone will not deliver rational results in this area. We don't expect a new freight company to build its own Hume Highway, so why not agree BEFORE any new network, how the wholesale rates will be charged. That inevitably results in setting a target ROI. And once you've done that, you may as well allow every telco to take up an equity interest proportionate to their market share. Let the regulator be the deadlock-unlocking determiner of which technology in which locations, which contractor to give the build contract to, etc, if the shareholders cannot reach a clear 75% majority decision.
    As to the related public debate over which technology, I think it silly to think of a single approach, beyond the nodes (ie to premises). Some of Australia is so remote that ONLY satellite is cost-justified for broadband, whereas the denser parts could all be fibre to the dwelling or node, depending upon maximum run-lengths. In other words, the houses 2+km from a country town with good working PSTN should not be dug up and replaced, just because of a 'concept'. Saner to gradually replace low-density elements when they are up for replacement due to age/breakdown.
    Graeme Harrison (prof at-symbol
  • I can't believe I'm saying this...

    While I normally am right beside you throwing pies at Telstra's face, in this case I have to submit to my personal experiences in the UK.

    Youare quoting the successful cries of one Telco (BT) against the negative ones of another (Telstra).

    As rosy as things sound in the UK, trust me it still takes 45-120 minutes on the phone with BT to get anything done. Their installations can take 8-16 weeks depending on where you are and there is nothing that can be done about the queues. If you are a business willing to pay $2000 to speed up the factory broadband installation and Granny Winchester put her application in 3 minutes before you then she comes first.

    And of course my favourite response not too long ago "ADSL? If you want a business service should you be using ISDN?".

    Don't get me started on support....

    BT might be ahead at the government ownership level, but I'll take Telstra support over them any day.
  • Amateurs?

    The companies that make up Terria may be young by comparison to Telstra, but amateurs? No. Telstra have made redundant a lot of highly skilled (no doubt some even trained by Telstra themselves) telecommunications workers over the years, and who do you think a lot of those people work for now?